Keystone XL Rejection: The Road Not Taken

In a widely expected decision, the Obama administration on Wednesday rejected the Keystone XL pipeline, as the proposal currently stands. It has left the option open for approving a pipeline that has a revised route through Nebraska, one which protects Nebraska’s Sand Hills region and the Ogallala aquifer. The decision will most certainly be revisited over and over (and over) again as the country marches toward the 2012 presidential election. However, how this decision impacts Obama’s reelection outlook is an issue of lesser importance. Also, the decision isn’t interesting either for its shock-value or for its implications on the environment or U.S. energy security. The real concern is that it became such a vaunted debate in the first place.

Since the Obama administration delayed the decision in November 2011, it was clear that the White House was unwilling to make such a politically-treacherous decision until after the election in November. Once the Republicans forced the issue with the 60-day deadline for a decision on the pipeline (as part of the extension of the payroll tax cuts), the administration made it clear that it would reject the project on the basis that it needed more time for an appropriate assessment of potential new routes.

The delay has encouraged both proponents and opponents to double-down on flimsy, ideological arguments. Those in favor argue that the project will create 20,000 American jobs and help reduce rising oil prices; opponents counter that it will increase U.S. dependence on fossil fuels and end any hopes of abating carbon emissions. Alas, most of these arguments are misleading. The majority of jobs that would be added by this project would be temporary, which, while not insignificant, does not represent a salvation for the country’s unemployment levels—contrary to how the project is currently being pitched.

Further, because the United States is fully integrated into the world oil market, the project’s approval will have a negligible impact on global oil prices (unless the pipeline can miraculously appease the Iranians and reduce tensions in Iraq, Russia, Nigeria, and Venezuela).

On the other hand, because the Canadian oil sands will be developed one way or another (the United States cannot determine Canadian energy policy, and the Canadians will develop their resources), the administration’s decision will not have any impact on additional emissions from their production. And it will not increase the U.S. thirst for oil; it will merely displace existing imports from other producers. Only if Americans drive less can the U.S. decrease its oil demand.

This brings us to the real tragedy of this fiasco: it should never have become such a high-profile debate in the first place. The United States has long been importing oil—both conventional (crude oil) and unconventional (like the oil sands)—from Canada. Any proposed expansion of imports from a stable ally such as Canada should have raised very few eyebrows. Moreover, the oil would likely displace demand for heavy oil from Venezuela and Saudi Arabia, whose oil tends to be heavier in nature and suitable for the complex refineries of the Gulf Coast. Decreasing imports from both countries is largely considered to be a good thing. Finally, concerns over pipeline safety and leakages are generally overblown but also easily resolved through sounds construction and proper monitoring and regulation.

Mr. President, in 2008 you demonstrated your nearly unparalleled ability to communicate complex messages to the public. In this issue, you have a complex message that deserves honest, balanced, and apolitical consideration. Climate change is real. So is our addiction to oil. This pipeline will neither solve, nor exacerbate either concern. We simply have the opportunity to limit imports from less-savory oil producers. Seize it.